NSS k prekluzi lhůty pro stanovení daně

NSS on the limitation of the time limit for tax assessment

The Supreme Administrative Court[1] once again confirmed the validity of the case law when it considered the judgment of the Regional Court in Brno in the matter of the limitation of the time limit for tax assessment. In the present case, the Regional Court concluded that the conduct of the tax audit constituted unlawful interference, since the tax audit was initiated after the standard time limit for the tax assessment had expired.

The main points of the case are briefly summarised below:

• On 28 February 2015, the company filed a proper withholding tax return for the 2014 tax year (the last day of the tax assessment period in this case was 2 April 2018).
• On 12 March 2018, the tax authorities issued a notice to file an additional tax return.
• On 21 March 2018, the company responded with a statement in which it disputed whether it was obliged to file an additional tax return.
• On 18 May 2018, the tax authorities initiated the procedure for the removal of doubts.
• Subsequently, on 28 February 2019, the tax authorities initiated a tax audit, in the course of which it assessed additional tax on the company.

The dispute was whether the notification of the notice to file an additional tax return followed by the procedure for removal of doubts extended the time limit for assessment of tax by 1 year pursuant to Section 148(2)(a) of the Tax Code.

The SAC relied on its earlier case-law[2] and concluded that the effects of the notice to file an additional tax return on the extension of the time limit for the assessment of tax arise only if there is a factual and temporal link between the notice and the assessment of tax. That is to say, the additional tax is assessed as a direct consequence of the notice (or the subsequent procedure for the removal of doubts).

In the present case, the additional tax was only levied following a tax audit. According to the SAC, in such a case the causal link between the notice and the tax assessed was interrupted. In the present case, it is irrelevant that the tax audit was initiated immediately after the procedure for the removal of doubts. The tax audit does not establish a substantive link, since the resulting tax assessment was not made in connection with the notice issued.

Since the tax assessment was not made on the basis of a notice to submit a supplementary tax return (or a subsequent procedure for the removal of doubts), the time limit for the assessment of tax under Article 148(2)(a) of the Tax Code was not extended by 1 year. It follows that the tax audit was initiated after the time limit for assessment had expired and thus constituted unlawful interference.

Finally, the SAC noted that it is the duty of the taxauthorities to take steps leading to the possible assessment of tax in a timely manner in accordance with the law. If the tax authorities leaves all the necessary steps until the end of the tax assessment period, it exposes itself to the risk of exceeding the time limit for the tax assessment

If you have any questions, please contact the authors of this article or the EY tax team you are working with.

Authors:

Radek Matuštík

Karolína Moškořová

References:

[1] Judgment of 24 February 2023, No 3 Afs 360/2021

[2] Judgment of 5 March 2020, no. 1 Afs 441/2019, Judgment of 30 April 2015, no. 2 Afs 1 /2015-49, Judgment of 18 June 2020, no. 2 Afs 388/2019-70